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Old 01-11-2010, 11:42 AM
 
424 posts, read 2,038,877 times
Reputation: 153

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We qualified to borrow $250k, on ONE salary (that is a good idea), but are actually only going to borrow about 100k and buy much less house than we could "qualify" for. I've heard ALL your housing expenses (including utilities, which includes phone and cable, etc. too) should be under 40% of your income, even closer to 30%. So what you can qualify to borrow doesn't really mean that's a good deal for you and the right thing to do. We chose to be more comfortable financially instead. Plus, as someone mentioned, it costs less in taxes and utilities to buy "less house" too. Just because you can get a certain loan doesn't mean you should, or should want one. you know?
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Old 01-12-2010, 08:12 AM
 
3,742 posts, read 7,097,324 times
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If you are in an area where you can buy the kind of house you need for significantly less than the approved amount, do that. Lenders look out for their interests, not yours, and they certainly aren't financial advisors.

I'd look more at the house payment and how it would fit into my budget than at the total some stranger thinks I can afford.
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Old 01-12-2010, 08:23 AM
 
Location: Austin
7,051 posts, read 16,728,931 times
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In my market, when you factor in taxes, insurance, and everything, most people get approved for just over 2 1/2 times their salary. I would say you're going to be well above your means at a $340k loan amount.
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Old 01-12-2010, 08:34 AM
 
845 posts, read 2,012,998 times
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Those same calculators are responsible for burying half of America in debt. Taxes on a 425K home could be 700 per month. Buy a small house on a good lot in a good neighborhood. See what you can get by with. 400 in the suburbs is a bad investment right now, IMHO.
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Old 01-12-2010, 09:37 AM
 
Location: Mount Laurel
4,146 posts, read 8,248,575 times
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I personally would not take on a $340K mortage with that household income. I always like the idea of loaning the amount based on the income of one instead of both. Remember that with a mortage every extra dollar you borrow, the more interest you are paying every month. Don't over extend yourself to the point that you have no liquid saving.

Unless you can put down 50% on the house, a $100K/year income family shouldn't live in a $450K home.
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Old 01-12-2010, 11:18 AM
 
Location: Floriduh
164 posts, read 848,980 times
Reputation: 268
Dave Ramsey the financial guru has some advice on buying and mortgages:

http://www.daveramsey.com/article/how-much-house-can-you-afford/lifeandmoney_realestate/


His guidlelines are to strict in my opinion in stating that your payment should never be more than 25% of your income on a 15 yr mortgage.


On 105k income and that childcare costs. No way in Hell I would jump into that mortgage, just my opinion, no offense.


As a realtor i never suggest anyone having a house payment more than 35% of there take home pay and to have at least 6 months of savings on hand. This economy is to volatile to take that risk right now.
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Old 01-12-2010, 01:41 PM
 
Location: Ft Lauderdale
352 posts, read 939,941 times
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"The general rule of thumb is that your house payment (including taxes, principal,interest HOA) should not exceed 29% of your take home (net) pay. That is what most financial planners say today."
Thank you!

Did people learn NOTHING from the last 5 years? DO NOT stretch your budget to buy a home. I'm glad there are plenty of voices of reason on the board!
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Old 01-12-2010, 01:43 PM
 
Location: Ft Lauderdale
352 posts, read 939,941 times
Reputation: 106
Quote:
Originally Posted by campmom123 View Post
We qualified to borrow $250k, on ONE salary (that is a good idea), but are actually only going to borrow about 100k and buy much less house than we could "qualify" for. I've heard ALL your housing expenses (including utilities, which includes phone and cable, etc. too) should be under 40% of your income, even closer to 30%. So what you can qualify to borrow doesn't really mean that's a good deal for you and the right thing to do. We chose to be more comfortable financially instead. Plus, as someone mentioned, it costs less in taxes and utilities to buy "less house" too. Just because you can get a certain loan doesn't mean you should, or should want one. you know?

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Old 01-12-2010, 08:05 PM
 
Location: Connecticut
24,329 posts, read 39,765,299 times
Reputation: 6829
Only you can say how much you can afford for a house payment each month. Some will tell you no more than 33% others will say not more than 25% percent. Given your position I would say somewhere between 25% and 30% would be reasonable. This would include your mortgage costs, taxes and insurance. If you did not have kids and a daycare cost, I would say you could go higher.

To those who are so shocked at the OP's cost for daycare, I can tell you that this is not uncommon in most major cities for quality care. We were paying $1,300 per month and that was several years ago. Jay
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Old 01-13-2010, 09:22 PM
 
Location: GA
34 posts, read 157,209 times
Reputation: 27
Default $1800 in childcare true - but can you

Hey all - thanks for the spirited responses to my original post. BTW - we are in GA north of Atlanta.

As for childcare - both my wife and I work (and earn $105K). It's not just one parent. We have a nanny we pay $11 an hour. She's here from about 8:30AM to around 4ish - and it ends up around $425-$450 a week. So actually just a little under $1800.

I was suprised at the gasps. Even childcare facilities like Kids R Kids charge about $250 for the first kids, and $200 for the second per week - or $450 a week or $1800 a month.

If this seems crazy high - if you all don't mind me asking - what do you spend on childcare for two children?

If my wife stayed home, we'd thus save $1800 a month in childcare costs - but lose about $900 in her salary.

To come full circle to my original post - let's say we bring home approximately $6500K spendable cash each month. Subtract the $2200 mortgage/tax/insurance payment (on a $425K house). Subtract $1800 in childcare. Subtract a $400 car payment.

$2100 left.

So out of that $2300 a month - we must pay on electric ($200), home gas ($35), cable/internet ($100), cell phone bills ($175), car/life insurance ($250).....$750 here.

$1340 left.

Water, sewage, and trash was included where we last lived so I don't know the cost. I'll say those would total $150 a month.

$1190 left.

THE BIG QUESTION:

Now we need groceries, car gas and entertainment for two adults and two toddlers. Anything that's left goes into IRAs or college savings.

I'll note that my wife gets retirement through her work and with it, we save to the max (and we're ahead of the game on her side as she has IRAs from family).

So technically out of the $1190 - I only need to put into IRAs for one person.

So - can YOU get the items noted immediately above for $1190 a month?

Looking at our historical spending over the years, we can't (with $2200 in home payments at least). Somehow - in this scenario - we'd consume a bit more of the $1190 that's left. IRAs/college savings take the hit because you've gotta eat and put gas in the car.

But if you tell me we should be able to afford these last items for $1190 a month - then that's my leak.

And if so - then we can get that $425K house - but we need to buckle down.
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